Misys tumbles 20 per cent after warning over profits

Misys, the software and financial services company, yesterday shocked investors with a warning that its profits would nosedive this year after suffering from poor trading conditions.

The news that revenues for the half-year are likely to be 10 per cent down on 2002 sent the shares tumbling by more than 20 per cent, knocking more than £300m off the value of the company. The shares closed at 221.5p, down 58.5p.

Only three months ago, Kevin Lomax, the chairman of Misys, said that although the trading environment for the company was difficult, he "continued to expect the group to make further progress in the current financial year" and that progress would be "weighted towards the second half".

But Misys said yesterday that since its annual general meeting, trading conditions had been "more demanding" than the company expected and operating margins would be hit.

The sudden deterioration of the company's performance surprised investors. "It doesn't get much worse than this and it doesn't get this bad this quickly," one shareholder said yesterday. "They were either being dishonest at their annual general meeting or they are completely incompetent.

"The shares deserve to be this low. The management has clearly been over-optimistic and it is now catching up with them."

Misys specialises in providing software for the banking and financial services sector, which has drastically cut back its IT spend while stock markets remain depressed.

The company said yesterday that while it was "encouraged" by the future investment plans of its customers, banks still "remain cautious in initiating larger IT projects".

Revenues are expected to fall 13 per cent in its banking division in the six months to the end of November.

Its largest division is financial services, where it owns a network of financial advisers.

Revenues here, however, are expected to be 16 per cent down on the first half of 2002 because of a dropping number of advisers on its books and increased compliance costs it has had to account for.

Analysts yesterday slashed their forecasts for the company, with some now predicting a slide in profits for the year of up to 12 per cent, to around £106m.